Diversity Benchmarking: National Evaluation of Diversity Reporting (Reference Date: 31 December 2024)

Diversity Benchmarking National Evaluation of Diversity Reporting (Reference Date: 31 December 2024)

Diversity Benchmarking Page 2 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) Table of Contents 1 Summary.................................................................................................. 3 2 Background ............................................................................................................. 4 3 Description of the Sample ................................................................................ 5 4 Results............................................................................................................... 7 4.1 Diversity Policy ........................................................................................................ 7 4.2 Diversity Practices in Management Bodies ........................................................... 13 4.2.1 Gender Structure ............................................................................................................... 13 4.2.2 Age Structure ........................................................................................................................... 19 4.2.3 Educational Background ................................................................................................................ 22 4.2.4 Professional Background ........................................................................................................... 24 4.2.5 Geographical Origin ............................................................................................................ 26 4.3 Gender Pay Gap...................................................................................................... 28 5 Conclusion........................................................................................................................ 30

Page 3 of 30 Diversity Benchmarking National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) 1 Summary The European Banking Authority (EBA) published guidelines on benchmarking diversity practices in 2023. Based on this, the Deutsche Bundesbank examined the diversity practices and strategies in the management bodies (executive board and administrative or supervisory board) of 158 German CRR credit institutions as well as medium and large securities firms as of the reference date 31.12.2024. A diverse composition of management bodies with regard to age, gender, geographical origin, as well as educational and professional background can reduce the risk of 'groupthink', strengthen risk control, and improve the overall resilience of institutions. Despite regulatory requirements, 52 out of 158 institutions do not have a diversity strategy, including some significant institutions. Institutions with a diversity strategy have predominantly set targets to promote the underrepresented gender (83%); around 70% of them use quantitative targets. In many executive boards, the target quotas for the underrepresented gender are at most 25%. In contrast, target quotas of over 25% were set more frequently in the administrative or supervisory boards and were achieved more often overall. Women are significantly underrepresented in management bodies. In executive boards, only 15.5% of members are female; in a considerable number of institutions, there is no female executive board member. In the administrative or supervisory boards, the proportion of women is significantly higher at 26.8% than in the executive boards. The members of the management bodies are most frequently between 51 and 60 years old. In executive boards, industry-typical training and career paths predominate with degrees in business or economics or banking training as well as professional experience in banking, whereas the administrative or supervisory boards are more heterogeneously staffed. CRR credit institutions and securities firms must design their remuneration policy and practice in a gender-neutral manner. In practice, however, there are wage differences between the genders: In executive boards (excluding chairs), women receive around 5% less remuneration on average than men; in the administrative or supervisory boards (excluding chairs/employee representatives), the average pay gap is smaller. Some institutions record pay gaps of more than 10%, particularly in the executive board. All CRR credit institutions and securities firms are obliged under European regulations to promote diversity in their management bodies. Institutions without a diversity strategy must develop them promptly and implement associated measures. Significant CRR credit institutions should define quantitative targets for the representation of the underrepresented gender in the management body as part of their diversity strategy; all other institutions should set at least qualitative targets. Furthermore, institutions that already pursue quantitative targets could design them more ambitiously to further strengthen the representation of the underrepresented gender. Last but not least, all institutions must design their remuneration policy and practice in a gender-neutral manner and, if necessary, take appropriate measures to eliminate any deficits.

Diversity Benchmarking Page 4 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) 2 Background All CRR credit institutions as well as Medium and Large Securities Firms are obliged under European regulations to promote diversity in their management bodies. 1 According to Article 91(10) of Directive 2013/36/EU (CRD IV), all CRR credit institutions should pay attention to a broad range of qualities and competencies when appointing board members and introduce a diversity policy for the management body for this purpose.3 Via Article 9(1) of Directive 2014/65/EU (MiFID II), this applies equally to securities firms. Specifically, it must be ensured that the management bodies are composed in such a way with regard to age, gender, geographical origin, as well as educational and professional background that diverse views and experiences are represented. The background is that a homogeneous composition of the management body can favor the risk of "groupthink" and thus insufficient control of management decisions. In contrast, more diversified management bodies can improve risk control and the resilience of institutions.4 Additionally, there are further specific requirements, particularly for significant institutions within the meaning of Section 1(3c) KWG5, which are explained in the following sections. The European Banking Authority (EBA) published guidelines on benchmarking diversity practices in 2023. 6 These are intended to make the progress of institutions comparable and increase transparency regarding diversity strategies and the gender pay gap. Supervisory authorities are obliged to collect the information provided for in the guidelines in the prescribed form and scope and transmit it to the EBA (Article 91(11) CRD in conjunction with Article 435(2)(c) of Regulation (EU) No 575/2013 (CRR)). Based on this data, the EBA publishes an EU-wide benchmarking report. The Deutsche Bundesbank collected diversity practices in a sample of 158 German CRR credit institutions as well as Large and Medium Securities Firms as of the reference date 31.12.2024 based on these guidelines. This evaluation summarizes the status of measures to promote diversity in the management body in these institutions.

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1In line with the terminology of the Banking Act (KWG) and the Securities Trading Act (WpHG), the generic masculine is used in this evaluation. The selected person designations refer equally to all genders. 2In line with the underlying EBA guidelines, references to Directive 2013/36/EU in this evaluation refer to the version of 20 May 2019 (CRD V). 3National implementation is in Section 25d(11) KWG. 4Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176 of 27.6.2013, p. 344, recital 60. 5According to Section 1(3c) KWG, an institution is significant if its total assets exceeded an average of 15 billion euros at the respective reference dates of the last four completed financial years, it meets one of the conditions according to Article 6(4) second subparagraph of Regulation (EU) No 1024/2013, or it has been classified as potentially system-relevant within the meaning of Section 12. 6EBA (2023): Guidelines on benchmarking measures to promote diversity, including diversity strategies and the gender pay gap, pursuant to Directive 2013/36/EU and Directive (EU) 2019/2034 (EBA/GL/2023/08) (hereinafter: EBA Guidelines on Benchmarking Diversity Practices).

Diversity Benchmarking Page 5 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) 3 Description of the Sample The sample comprises a total of 158 institutions, of which 147 are CRR credit institutions and 11 are securities firms (ten Medium and one Large Securities Firm). 7 Among the CRR credit institutions included in the sample, 52 are significant institutions within the meaning of Section 1(3c) KWG (hereinafter "significant institutions").8 For the evaluation, the CRR credit institutions were assigned to different size categories based on their total assets, while no such classification was made for securities firms (see Table 1). The size categories "10 to < 30 billion EUR" and "≥ 30 billion EUR" include only significant institutions; additionally, another significant institution is in the size category "< 1 billion EUR".

Table 1 Institutions and Number of Members of the Respective Bodies

Institutions Members of the Executive Board Members of the Administrative or Supervisory Board CRR Credit Institutions (hereinafter CRR-CI) 147 488 1,758 Total Assets < 1 billion EUR 47 100 385 Total Assets 1 to < 10 billion EUR 49 141 642 Total Assets 10 to < 30 billion EUR 17 65 233 Total Assets ≥ 30 billion EUR 34 182 498 Significant Institutions 52 249 746 Securities Firms 11 34 32 Sample 158 522 1,790 Total CRR Credit Institutions 1,368 - - Total Large and Medium Securities Firms 118 - - Sources: Deutsche Bundesbank, Bank Statistics 2024, Annex 1, p. 1 (Total number of CRR credit institutions); Federal Financial Supervisory Authority (BaFin), Annual Report 2024 of the Federal Financial Supervisory Authority, p. 9 (Total number of Large and Medium Securities Firms). Deutsche Bundesbank

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7159 institutions were requested to submit information regarding their measures to promote diversity. Among them, three institutions did not submit data; two institutions voluntarily submitted data. The voluntarily submitted data were included in the present study, resulting in slight deviations from the EBA sample. 8Institutions that are considered significant under Section 1(3c) KWG are not identical to "significant institutions" (SIs) within the meaning of Regulation (EU) No 1024/2013 (SSM Regulation), although many SIs are also significant institutions under the KWG.

Diversity Benchmarking Page 6 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) Overall, the institutions considered have 522 members of the executive board, of which 128 are chairs9 and 394 are other members. These CRR credit institutions and securities firms have an average of three executive board members. CRR credit institutions with a total assets of at least 30 billion EUR have more executive board members, particularly in the higher percentiles, than institutions with a lower total assets. Overall, the institutions considered have 1,790 members in the administrative and supervisory boards (ASB), of which 151 are chairs10, 431 are employee representatives, and 1,208 are other members. With regard to the ASB, 152 of 158 institutions provided information on the number of members.11 68 of 152 institutions have no employee representatives in the ASB, particularly CRR credit institutions with a total assets of less than 1 billion EUR and all securities firms. CRR credit institutions have an average of twelve ASB members. CRR credit institutions with a total assets of at least 10 billion EUR have an average of more members than those with a lower total assets. Securities firms have an average of five ASB members.

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930 institutions reported no chair, including 18 CRR credit institutions with a total assets under 1 billion EUR. The majority of institutions that reported no chair have two equal executive board members. 10One securities firm reported no chair. 11The six institutions that did not submit information on the administrative or supervisory board are not required under German law to establish such a body.

Diversity Benchmarking Page 7 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) 4 Results 4.1 Diversity Policy A significant proportion of CRR credit institutions and securities firms do not pursue a strategy to promote diversity in the management body, despite regulatory requirements. CRR credit institutions as well as Large and Medium Securities Firms should pay attention to a broad range of qualities and competencies when appointing board members and introduce a diversity policy for the management body for this purpose. Furthermore, they are obliged under Article 435(2)(c) CRR or Article 48(b) of Regulation (EU) 2019/2033 (IFR) to disclose their diversity policy for the selection of members of the management body at least annually, including the targets and the degree of target achievement. Overall, 106 out of 158 institutions pursue a diversity strategy (CRR Credit Institutions: 68.7%, Securities Firms: 45.5%). Among significant institutions, the proportion of institutions with a diversity strategy is 92.3%. CRR credit institutions with a total assets under 1 billion EUR record the lowest proportion of institutions pursuing a diversity strategy at 44.7% (see Figure 1).

Diversity Benchmarking Page 8 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) Most diversity strategies contain targets to promote the representation of the underrepresented gender in the management body. Thus, 88 out of 106 institutions define corresponding targets in their diversity strategies (CRR Credit Institutions: 85.1%, Securities Firms: 40%). However, it shows that there is still room for improvement, particularly among CRR credit institutions with a total assets under 10 billion EUR and securities firms (see Table 2). Institutions set their targets predominantly separately for the executive board and ASB and significantly less often for the management body as a whole (69.3% vs. 13.6%). 44.3% of institutions include employee representation in the target definitions for the ASB; non-binary persons are not explicitly considered in the institutions' strategies.

Table 2 Institutions with Diversity Strategy and Target for Gender Diversity

Number of Institutions in the Sample Number of Institutions with Diversity Strategy Number of Institutions with Diversity Strategy Defining a Target to Promote Gender Diversity Proportion of Institutions with Diversity Strategy Defining a Target to Promote Gender Diversity CRR-CI < 1 billion EUR 47 21 15 71.4% CRR-CI ≥ 1 billion EUR < 10 billion EUR 49 33 26 78.8% CRR-CI ≥ 10 billion EUR < 30 billion EUR 17 14 13 92.9% CRR-CI ≥ 30 billion EUR 34 33 32 97.0% Significant Institutions 52 48 46 95.8% Securities Firms 11 5 2 40.0% Total Institutions 158 106 88 83.0% Deutsche Bundesbank

Diversity Benchmarking Page 9 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) CRR credit institutions and securities firms use quantitative and qualitative targets to strengthen the representation of the underrepresented gender in the management body. Quantitative targets make it possible to measure and compare progress. Qualitative targets, on the other hand, provide, for example, that the underrepresented gender is given priority in job appointments if qualifications are equal. According to the "Joint EBA/ESMA Guidelines on the Assessment of the Suitability of Members of the Management Body and Holders of Key Functions" (hereinafter: Suitability Assessment Guidelines), significant institutions should define quantitative targets for the representation of the underrepresented gender in the management body as part of their diversity strategy. Furthermore, the guidelines stipulate that institutions should state by when they want to achieve the target and what measures they provide for this purpose. For all other institutions – particularly those with fewer than five members in the management body – a qualitative target setting is sufficient according to the guidelines. 12 While the majority of institutions define measurable targets to promote the underrepresented gender, around 30% of institutions restrict themselves exclusively to qualitative target settings. Around 70% of institutions with a corresponding diversity strategy have developed quantitative targets for the representation of the underrepresented gender (CRR Credit Institutions: 69.8%, Securities Firms: 100% or 2 institutions). Four significant institutions have set exclusively qualitative targets – contrary to the Suitability Assessment Guidelines. Looking at the different institution groups in Figure 2, it can be noted that particularly CRR credit institutions with a total assets of less than 1 billion EUR frequently pursue exclusively qualitative target settings. CRR credit institutions with a total assets of 10 billion EUR or more, on the other hand, quantify their targets predominantly.

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12EBA/ESMA (2021): Guidelines on the Assessment of the Suitability of Members of the Management Body and Holders of Key Functions (EBA/GL/2021/06, ESMA35-36-2319), para. 103.

Diversity Benchmarking Page 10 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024) Many institutions have set low target quotas of at most 25% for the underrepresented gender, with the quotas for the executive board often being lower than for the ASB.13 Overall, 51 institutions each have set a quota greater than zero for both the executive board and the ASB.14 Almost half of these institutions have set a low target quota of up to 25% for the executive board (see Table 3). Among them, 68% have already achieved their target; for higher quotas, the proportion is significantly lower. For the ASB, the target values are overall higher than for the executive board and were also achieved more often. Thus, 32 out of 51 institutions have set a target quota of at least 30%.15

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13In Germany, there are statutory minimum requirements regarding gender diversity in management bodies for listed and co-determined companies. The Management Boards and Supervisory Boards Act (FüPoG) has prescribed a fixed quota of at least 30% for the underrepresented gender in the supervisory board since January 1, 2016. With the second Management Boards and Supervisory Boards Act (FüPoG II), which entered into force on August 1, 2022, the requirements were tightened further: Executive boards with more than three members must generally be staffed with at least one woman and at least one man. If companies set a target size of zero for the underrepresented gender, they must justify this. According to the EBA, a target quota of around 40% for the underrepresented gender is appropriate from a good corporate governance perspective. 14Some institutions have set a minimum number of persons as the target size. In these cases, a target quota was derived for the evaluation by relating the absolute target size to the total number of members of the executive board or ASB. If institutions specified both a target quota and an absolute target size, the higher value was considered for the evaluation – i.e., either the directly specified target quota or the quota calculated from the absolute target size. 15Some institutions stated that they define a target quota for both the executive board and the ASB, but only report a target quota greater than zero for the ASB. One institution has set a target quota of 33% for the management body as a whole.

Diversity Benchmarking Page 11 of 30 National Evaluation of Diversity Reporting (Reference Date: 31 December 2024)

Table 3 Target Quotas for Executive Board and ASB (Underrepresented Gender)

0% to 25% > 25% to 33.4% > 33.4% to 50% Executive Board Number of Institutions 25 18 8 Proportion of Institutions 49.0% 35.3% 15.7% Target Achieved 68.0% 55.6% 37.5% ASB Number of Institutions 18 25 8 Proportion of Institutions 35.3% 49.0% 15.7% Target Achieved 83.3% 72.0% 62.5% Deutsche Bundesbank

The majority of CRR credit institutions with a diversity strategy consider aspects such as age, educational background, and professional background in it. Thus, the proportion of CRR credit institutions that include these aspects fundamentally is each over 70%. This observation applies to all size categories (see Table 4). Only geographical origin16 is included in the diversity strategy by significantly fewer CRR credit institutions (50.5%). The target achievement rates for the mentioned aspects vary only slightly and lie between 74.3% and 80.4% across all institutions. The diversity strategies of securities firms do not consider any of the above-mentioned aspects besides gender diversity.

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16By geographical origin is meant here a stay of at least three years for educational or professional purposes. See also EBA/GL/2023/08, para. 10.

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Table 4 Other Aspects Considered in the Institutions' Diversity Strategies

Institutions with Diversity Strategy Age Educational Background Professional Background Geographical Origin Institutions Target Achieved Institutions Target Achieved Institutions Target Achieved Institutions Target Achieved CRR-CI < 1 billion EUR 21 71.4% 73.3% 71.4% 86.7% 71.4% 86.7% 42.9% 88.9% CRR-CI ≥ 1 billion EUR < 10 billion EUR 33 75.8% 76.0% 78.8% 80.8% 72.7%...